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Colombia Publishes Decree on Attribution of Income to Permanent Establishments

Colombia has published Decree No. 1973 of 29 October 2019, which includes updated provisions on the attribution of income to a permanent establishment or branch in Colombia of a non-resident individual, company, or other foreign entity. The main provisions are as follows:

  • Income and occasional earnings attributable to a permanent establishment or branch in Colombia includes those that the permanent establishment or branch could have obtained, in accordance with the principle of full competition, as if it were a separate and independent company from that company of which it is a part, whether said income and occasional earnings come from facts, acts, or operations between the permanent establishment or branch in Colombia with another company, natural person, or entity, or with other parts of the same company of which it is a permanent establishment or branch.
  • For this purpose, the functions performed, the assets used, the personnel involved, and the risks assumed by the company through the permanent establishment or branch, as well as by other parts of the company must be taken into account.
  • A permanent establishment will be taxed on the income and occasional earnings, from both domestic and foreign sources, that are attributed to it based on the determination of the liabilities, assets, income, capital, costs, and expenses, which must be supported in a study on functions, assets, and risks.
  • Profits that correspond to income and occasional gains attributed to permanent establishments or branches in Colombia, which are transferred in favor of related companies abroad, are subject to tax as dividends in accordance with the Tax Statute.

Further to the provisions on permanent establishments and branches, the Decree also includes provisions regarding the taxation of private equity funds and collective investment funds, including for the deferral of tax, withholding obligations, and others.

The Decree is generally effective on 29 October.

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